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Technology Stocks : QUANTUM -- Ignore unavailable to you. Want to Upgrade?

To: IGL who wrote (5284)	11/19/1997 3:07:00 PM
From: Roader	Read Replies (2) \| Respond to of 9124

=Options Report: Major Short Position Opened On Quantum Dow Jones News Service via Dow Jones By Steven M. Sears NEW YORK (Dow Jones)--One bold options trader shorted the equivalent of a million shares of Quantum stock, worth some $3.08 million. A trading source suggested that the Quantum trader was taking advantage of unusually high levels of volatility that exist throughout the options market as a result of the violent gyrations in the stock market. Ideally, options traders would like to sell options with high volatility and cover those trades when the volatility is low. The opposite of the principle also applies because volatility is one of the primary determinants of an options price. An option with high volatility can be expected to have a high price. The implied volatility of Quantum's February 27 1/2 calls that were sold is 68.5%, which the trading source said is just shy of the 70% to 75% volatility levels that the contract normally registers around earnings periods. Quantum's stock, is down 1 9/16 at 26 1/16 on heavy volume. The trading source added that Quantum's stock price has ranged in recent months between 20 and 43, moving in some sessions as much as 5 points. The stock's trajectory, as well as the fact that the company will report earnings in February, are both factors that influence the volatility of the options contracts. Quantum's industry, disk drives, also has experienced some problems. Two other leading disk-drive makers, Seagate Technology and Western Digital, recently warned investors that earnings would be lower than expected in the current quarter. Options trading is not notable in either issue. Of course, it is possible that the seller of the February 27 1/2 calls has something else in mind beside selling high volatility with the intent of buying back low volatility. Options are often used by institutional traders to buy-write stocks, which involves selling calls and buying stocks, the costs of which are lowered by the money received from simultaneously selling contracts. Elsewhere in the options market: - The Standard & Poor's 100 Stock Index, or OEX, will split Monday in an attempt to broaden the index's appeal with retail customers. The cost of the index has increased so much over time, that many investors are "priced out" of trading the product, according to the Chicago Board Options Exchange, where the product trades. Taking a position in the December 880 calls now costs $4,462.50 per contract. The cost increases because many investors buy more than one contract and pair it with another in hopes of making a profit off of the market's fluctuations. For each OEX options that is currently held by an investor, the investor will get two contracts at the reduced value with a strike price that is half of the original strike price. An OEX 850 call will become two OEX 425 calls. OEX LEAPS, or Long-Term Equity Anticipation Securities, will remain at the same strike price, but will be based on a fifth of the value of the new value of the OEX, the CBOE said. As a result of the changes, position and exercise limits will double. - Tellabs appears to have attracted a bear, who has taken a synthetic short position in the a maker of telecommunications products. The position could be used to offset the risk in an existing position, but that isn't known. On the surface, the sale of the December 50 call and the purchase of the December 50 put is the synthetic equivalent of a short-stock position. If the price of Tellabs stock decreases, the value of the puts will increase. The puts were likely bought with the money the trader received from selling the calls. The calls are down 3/8 at 4 on volume of 2,200 contracts, compared with open interest of 482 contracts. The puts are up 3/8 at 2 1/4 on volume of 2,240 contracts, compared with open interest of 836 contracts. (MORE) DOW JONES NEWS 11-19-97